Financial Awareness Quiz 51 –

The Union Minister of state for Personnel, Public Grievances and Pensions, Jitendra Singh has announced a pension of Rs.______ for Central government Employees.

1.

10000

2.

9000

3.

8000

4.

7500

5.

12000

Solution

Answer: The Union Minister of state for Personnel, Public Grievances and Pensions, Jitendra Singh while addressing the 29th meeting of the Standing Committee of Voluntary Agencies (Scova) in New Delhi on January 12, 2017 informed that the minimum pension for central government employees has been increased to Rs. 9,000 per person and ex-gratia amount has been increased from Rs. 10-15 lakh to Rs. 25-35 lakh.

Airtel’s Payments Bank has started its nationwide operations with an initial investment of Rs.______ crore.

1.

3000

2.

2000

3.

1000

4.

2500

5.

4000

Solution

Answer: Airtel Payments Bank started its nationwide operations on January 12, 2017 with an initial investment of Rs 3,000 crore and offering an interest rate of 7.25 per cent for savings accounts. The bank was launched by Finance Minister Arun Jaitley. This is the first payments bank which will be opened across 29 states in India to provide financial services to the millions who are outside the banking system.

Solution

Answer: The Chhabra Thermal Power Plant is located in Rajastham. On January 12 NTPC Ltd signed a non-binding Memorandum of Understanding with Rajasthan Rajya Vidyut Utpadan Nigam Ltd and Rajasthan Urja Vikas Nigam Ltd in the presence of chief minister Vasundhara Raje in Jaipur to takeover of the plant under asset-for-equity deal. As per the Memorandum of Understanding (MoU), NTPC would take four operational units of 250-MW capacity each and two other under-construction units of 660 MW capacity each at Chhabara Thermal Power Plant.

Which ratio is an indicator used in finance to analyze the returns of investment portfolios, and in performing due diligence?

1.

Bias

2.

Accounting liquidity

3.

Debt-to-capital

4.

Loss

5.

Net interest spread

Solution

Answer:

The bias ratio is an indicator used in finance to analyze the returns of investment portfolios, and in performing due diligence. The bias ratio is a concrete metric that detects valuation bias or deliberate price manipulation of portfolio assets by a manager of a hedge fund, mutual fund or similar investment vehicle, without requiring disclosure (transparency) of the actual holdings. This metric measures abnormalities in the distribution of returns that indicate the presence of bias in subjective pricing. The formulation of the Bias Ratio stems from an insight into the behavior of asset managers as they address the expectations of investors with the valuation of assets that determine their performance.

_______ is a cryptocurrency proposed as an extension to the bitcoin protocol.

1.

Zerocoin

2.

Cryptocurrency tumbler

3.

Proof-of-stake

4.

Coincheck

5.

Magnr

Solution

Answer: Zerocoin is a cryptocurrency proposed by Johns Hopkins University professor Matthew D. Green and graduate students Ian Miers and Christina Garman as an extension to the bitcoin protocol that would add true cryptographic anonymity to bitcoin transactions. Zerocoin was first implemented into a fully functional cryptocurrency released to the public by Poramin Insom, as the Zcoin. Zerocoin provides anonymity by the introduction of a separate mixing service known as zerocoin that is stored in the bitcoin blockchain. Though originally proposed for use with the bitcoin network, zerocoin could be integrated into any cryptocurrency.

Solution

Answer: Bitcoin is a cryptocurrency and a payment system invented by an unidentified programmer, or group of programmers, under the name of Satoshi Nakamoto. Bitcoin was introduced on 31 October 2008 to a cryptography mailing list, and released as open-source software in 2009.Bitcoins are created as a reward in a competition in which users offer their computing power to verify and record bitcoin transactions into the blockchain. This activity is referred to as mining and successful miners are rewarded with transaction fees and newly created bitcoins. Besides being obtained by mining, bitcoins can be exchanged for other currencies, products, and services. When sending bitcoins, users can pay an optional transaction fee to the miners.

Which theory is used for assembling a portfolio of assets such that the expected return is maximized for a given level of risk, defined as variance?

1.

Modern portfolio

2.

Kelly criterion

3.

Efficient frontier

4.

Asymmetric payoff

5.

None of the above

Solution

Answer: Modern portfolio theory theory is used. Its key insight is that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return. Economist Harry Markowitz introduced MPT in a 1952 essay, for which he was later awarded a Nobel Prize in economics. MPT assumes that investors are risk averse, meaning that given two portfolios that offer the same expected return, investors will prefer the less risky one. Thus, an investor will take on increased risk only if compensated by higher expected returns. Conversely, an investor who wants higher expected returns must accept more risk.

Which company was recently accused of putting the Indian flag as a doormat?

1.

e-bay

2.

Alibaba

3.

Flipkart

4.

Amazon.com

5.

Oak Street

Solution

Answer: Amazon was accused of putting the Indian flag as a doormat. On January 12 it was removed by the company after India threatened of not granting Indian Visa to any Amazon official if the company did not withdraw an Indian flag-themed doormat from its Canadian platform, the e-commerce website. Doormats featuring the Indian flag were made available on Amazon Canada site by two vendors -- Mayers Flag Doormats and XLYL. An image of the products was tweeted to the Minister, after which she asked the Indian High Commission in Canada to raise the issue with Amazon.

In finance, the _____ of an investment indicates whether the investment is more or less volatile than the market.

1.

Aplha

2.

Beta

3.

Gamma

4.

Omega

5.

Epsilon

Solution

Answer: In finance, the beta (β or beta coefficient) of an investment indicates whether the investment is more or less volatile than the market. In general, a beta less than 1 indicates that the investment is less volatile than the market, while a beta more than 1 indicates that the investment is more volatile than the market. Volatility is measured as the fluctuation of the price around the mean: the standard deviation. Beta is a measure of the risk arising from exposure to general market movements as opposed to idiosyncratic factors. The market portfolio of all investable assets has a beta of exactly 1. A beta below 1 can indicate either an investment with lower volatility than the market, or a volatile investment whose price movements are not highly correlated with the market. An example of the first is a treasury bill: the price does not go up or down a lot, so it has a low beta.

______ is a type of risk resulting from using models to make decisions, initially and frequently in the context of valuing financial securities.

1.

Valuation

2.

Reputational

3.

Model

4.

Profit

5.

Systematic

Solution

Answer: In finance, model risk is the risk of loss resulting from using models to make decisions, initially and frequently in the context of valuing financial securities. However, model risk is more and more prevalent in activities other than financial securities valuation, such as assigning consumer credit scores, real-time probability prediction of fraudulent credit card transactions, and computing the probability of air flight passenger being a terrorist.